Chesapeake Energy Corp. (NYSE:CHK) and Sinopec International Petroleum E&P Corp. have executed an agreement in which Sinopec will purchase a 50% undivided interest in 850,000 of Chesapeake’s net oil and natural gas leasehold acres in the Mississippi Lime play in northern Oklahoma (425,000 acres net to Sinopec).
The total consideration for the transaction will be US $1.02 billion in cash, of which about 93% will be received upon closing. Payment of the remaining proceeds will be subject to certain customary title contingencies.
Production from these assets including Mississippi Lime and other formations, net to Chesapeake’s interest and prior to Sinopec’s purchase, averaged about 34,000 barrels of oil equivalent per day in 4Q 2012 and, as of Dec. 31, there was 140 million barrels of oil equivalent of net proved reserves associated with the assets.
All future exploration and development costs in the joint venture will be shared proportionately between the parties with no drilling carries involved. As the operator of the project, Chesapeake will conduct all leasing, drilling, completion, operations and marketing activities for the joint venture. The transaction is anticipated to be completed in 2Q 2013.
Jefferies acted as financial advisor to Chesapeake Energy in the joint venture. The transaction represents the third joint venture Jefferies has advised on involving a Chinese national oil and gas company.
Sinopec is a state-owned super-large petroleum and petrochemical enterprise group headquartered in Beijing.
Headquartered in Oklahoma City, Chesapeake is an oil and natural gas company focused on discovering and developing unconventional natural gas and oil fields onshore in the US.